Are we going to witness an historical housing price correction amid sharpest rise in unemployment and social tension?...and the minimum you should know in order to protect yourself from this downturn from an economic, stock market and political point of view... with a pinch of humor and sarcasm.

Sunday, 4 March 2012

22%

Pretty conservative, when you know the overall difference between the region in Finland ( i.e price are inflated more in some region than others e.g. Helsinki Region/Uusimaa) and all the financial mortgage tricks that have been used to distort the real price (rented land, housing company debt, and of course massive sensitivity to short term rates etc...).

22% I'd rather say that it is the first target and is the minimal for a normal readjustment. I will add another 10-20% to have a more realistic level... the target is still to come back to 2003 levels (as it is happening in the US, basically when the global synchronized housing bubble started). In fact, it can overshoot to reach the 1998 level (but this is more a long term target e.g. the Japanese style)

13 comments:

HiInteresting one ... the issue is that Finns keep telling me that the prices are going up ... so what? ... getting annoying to know that this is just not sustainable ...But with the ECB which has just printed 1t€ for its LTRO, we will need to wait further ... Keep publishing, always a pleasure to read your viewsEric

This news (of a few days ago) strikes me as one way the housing bubble can break - I know that it is not to do with the price per square metre, but with the size of new homes.

"Uncertainty about the economic situation in Europe has made home builders cautious. Over half of all prefabricated house packages now being sold are for single-storey dwellings, and are around 100 square metres smaller than a decade ago.

....However, about 10 - 20 percent fewer prefab houses are being produced in total than last year, and most of those being manufactured are smaller than in the recent past.

....Single family dwellings were at their roomiest between 2002-2007. During those years, the favourite types of new houses had 200 - 250 square metres of living space on two floors. Now, that has shrunk by a hundred square metres to around 150."

I suppose a 25-40% reduction in the average house size is sign of some kind of bubble bursting. Actually, as we seem to be moving towards a time of higher energy costs I think smaller houses is a good thing

Family size has, as well, gone down over the years...so it seems natural that the dwellings size evolve that way.

Also, as price per meter square are high and in order to target first time buyers , builder have been building small size flat ...the only possible way to met the affordability for first time buyers.

Obviously as first time buyer are priced out of the market, it causes difficulty for the ones that want to sell...a owner of a very expensive - bubble like- house cannot move to another - bubble like - expensive house unless it manages to sell its house, and this is where first time buyers matter.

Now the market is slowing, topping at best...when interest rates are at historically low level...who would have thought that?

what is your interpretation on that sudden decrease?(either property seller can't sell and prefer the rental option? or people feel that price cannot correct and only increase is possible so why waiting...the final countdown? )

Also, around me I see more and more residential and apartment block being build - Not sure if all are listed in oikotie.

Also, I noticed that fund such as Sponsor III from Realia group is buying apartment block to rent...the ultimate last resort buyer...in any case investors are still in.

interest rates are still the big unknown...planning next to post a blog entry on that.

But at the same time the stock of existing properties is getting old and harder to renovate, so there will still be a market for the kind of properties you want to buy.

Also an expectation of low interest rates for years to come is supportive, compared to earlier expectations rates would rise.

However if Nokia woes are reflecting deeper problems for Finland then who knows what will happen? Currently there appears to be a fairly resilient Helsinki regional economy, and higher fuel prices will benefit Russia and so one way or another will likely benefit Finland.

But I have to say that looking out into the future there are many issues which are not going to go away. Some people are going to do better than other people and the world we knew will just be an historic abberation.

Cheap energy, and a massively rising world population, seem for example to be related.

It will be interesting to see how Spain gets on today with the bond auction

There are no more Rabbits in that hat. If the ECB begins buying bonds as the way to save the periphery then we are going to get considerable inflation. Alternatively if they buy peripheral bonds in insufficient quantities or maintain the sterilisations, the periphery crumbles anyway and the Euro as we know it, will either way be hopeless compromised by the abiliy of the periphery to control the core. Where in any case the core has allowed the creation of the mess the periphery is now in by funding the disaster.

All the core can think of is how to save itself by saving the periphery where there is no hope of such a rescue.

The game is over with no more extra time or rematches.

The only realistic outcome is they try to spend their way to prosperity just like any other failing society has done before them.

For sure the next weeks will mean historic/interesting/exciting/scary times are ahead of us, where only huge luck is going to ensure that every member of this forum passes thru this without painful consequences.

Expecting increased influx of foreign capital and people due to the fact that Finlands economy is performing at the top of the EU 27 when it comes to government debt levels.

This makes Finland seemingly a safe place to invest in Real Estate, unlike in the UK, Spain, Portugal and the Netherlands, where houseprices as set to go down for reasons that are not apparent in Finnish economy.

In the Netherlands, it's mortgage interest deduction that is under pressure, that is said to have pushed up houseprices and loan levels to go with it.

500,000 houses are said to be 'under water', ie. the height of the loan is larger than the underlying value of the house.

Helsinki Metropolitan area should also perform better than the rest of the country due to shortage of stock / growing population vs. depopulation trends due to old age elsewhere in the country.

Lots of elderly/older people in metropolitan areaseem to be interested in buying new/smaller appartments, which shouldhavetoo a somewhat positive effect on the market.